Here's Why Casa Holdings (SGX:C04) Has Caught The Eye Of Investors

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Casa Holdings (SGX:C04). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

We've discovered 1 warning sign about Casa Holdings. View them for free.

How Quickly Is Casa Holdings Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. To the delight of shareholders, Casa Holdings has achieved impressive annual EPS growth of 51%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Unfortunately, revenue is down and so are margins. This is less than stellar for the company.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

See our latest analysis for Casa Holdings

Since Casa Holdings is no giant, with a market capitalisation of S$21m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Casa Holdings Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

One shining light for Casa Holdings is the serious outlay one insider has made to buy shares, in the last year. Specifically, in one large transaction company insider Chow Hou Wee paid S$1.0m, for stock at S$10.60 per share. Seeing such high conviction in the company is a huge positive for shareholders and should instil confidence in their mission.

On top of the insider buying, we can also see that Casa Holdings insiders own a large chunk of the company. To be exact, company insiders hold 78% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. Of course, Casa Holdings is a very small company, with a market cap of only S$21m. That means insiders only have S$16m worth of shares, despite the large proportional holding. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Does Casa Holdings Deserve A Spot On Your Watchlist?

Casa Holdings' earnings have taken off in quite an impressive fashion. To sweeten the deal, insiders have significant skin in the game with one even acquiring more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Casa Holdings deserves timely attention. We should say that we've discovered 1 warning sign for Casa Holdings that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Casa Holdings, you'll probably love this curated collection of companies in SG that have an attractive valuation alongside insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.